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e Banking
e Banking
some of the most advanced services like using e-banking to pay bills
in shops and restaurants.
In this paper, the group will cover security issues and different
impacts regarding the traditional banking method. The group is
concerned about the issues presented because the group thinks that
these issues are very important and relevant today, a lot of people
save money and really trust banks with their money. In addition, the
group wants this research paper to be read by many students who are
in no knowledge about certain issues about banking. Lastly, the group
will provide and recommend different solutions about the issues
regarding E-Banking.
INTRODUCTION
now do so on the go when they are waiting for their bus to work,
when they are traveling or when they are waiting for their orders to
come through in a restaurant.
In this paper, the group will cover security issues and different
impacts regarding the traditional banking method. The group is
concerned about the issues presented because the group thinks that
these issues are very important and relevant today, a lot of people
save money and really trust banks with their money. In addition, the
group wants this research paper to be read by many students who are
in no knowledge about certain issues about banking. Lastly, the group
will provide and recommend different solutions about the issues
regarding E-Banking.
A few examples:
more choice;
greater competition and better value for money;
more information;
better tools to manage and compare information;
faster service.
We are very conscious of this in the FSA and are trying very
hard to be E-neutral (a recent example of this is the proposed
Conduct of Business Sourcebook). We have also selected E-commerce
as one of our regulatory themes for this year and are very active in
international fore but more of that later.
In the very near future, one can see m-banking leaping into a
new phase. With the advent of Java-enabled e-bankingdevices, the
shape of m-banking services is in for a change. One would also be
ensured the same amount of security and comfort as one would be
when using internet banking.
DEFINITIONS
Definition of E-banking
HISTORY OF E-BANKING
The past few years have seen customers migrating from branch
banking to a host of non-branch channels like ATMs, call centre and
internet banking. In case of ICICI Bank, around 55% of the
transactions now happen through ATMs, 22% through the internet,
12% through call centre and the remaining through branches.
Incidentally, around five years ago, transactions through internet
banking was a minuscule 2%. Through the new platform Mobile, all
internet banking transactions can now be done on e-banking.
Customers can now transfer funds to ICICI Bank and non-ICICI Bank
accounts, pay their utility bills and insurance premium and do a host
of other operations. The application covers savings accounts, demat,
credit card and loan accounts.
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Advantages
Disadvantages
That represents just the victims who actually filed a complaint with
the agency. The FTC estimate there was 10 million identity theft
victims that year. Already lot of banks are either providing e-banking
services or getting ready to provide e-banking services.
DEVELOPMENT OF E-BANKING
Authorization,
prudential standards,
transparency,
privacy,
money laundering, and
cross border supervision
as issues on which they felt that there is need for further work, both at
the analytical and policy level before any such guidance could be
developed. The FSA is involved in the Basel Group and will be
contributing to the work, participating in the drafting of papers and
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hosting both the groups next meeting and a roundtable for its
members and a number of European banks and service providers. We
welcome any contributions from the industry to this debate; and have
indeed been actively soliciting them.
Cross-border issues
Electronic banking has been around for some time in the form
of automatic teller machines and telephone transactions. More
recently, it has been transformed by the Internet, a new delivery
channel for banking services that benefits both customers and banks.
Access is fast, convenient, and available around the clock, whatever
the customer's location (see illustration above). Plus, banks can
provide services more efficiently and at substantially lower costs. For
example, a typical customer transaction costing about $1 in a
traditional "brick and mortar" bank branch or $0.60 through a phone
call costs only about $0.02 online.
MACROECONOMIC CHALLENGES
CHALLENGES
1. Interoperability
while SMS can provide the basics but becomes difficult to operate
with more complex transactions.
2. Security
Another challenge for the CIOs and CTOs of the banks is to scale-
up the e-banking infrastructure to handle exponential growth of
the customer base. With e-banking, the customer may be sitting in
any part of the world (true anytime, anywhere banking) and hence
banks need to ensure that the systems are up and running in a true
24 x 7 fashion. As customers will find e-banking more and more
useful, their expectations from the solution will increase. Banks
unable to meet the performance and reliability expectations may
lose customer confidence.
4. Application distribution
5. Personalization
Preferred Language
Date / Time format
Amount format
Default transactions
Standard Beneficiary list
Alert.
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IMPACT OF E-BANKING ON
TRADITIONAL SERVICES
The view that the Internet is a revolution that will sweep away
the old order holds much sway. Arguments in favor are as follows E-
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strategy
customer levels
earnings and costs
advertising spending
margins
funding costs
Merger opportunities and threats, both in the UK and abroad.
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RISKS IN E-BANKING
1) Strategic Risk
2) Business risks
Of course, these are old risks with which banks and supervisors
have considerable experience but they need to be watchful of old risks
in new guises. In particular risk models and even processes designed
for traditional banking may not be appropriate.
Transaction/operations risk - Transaction/Operations risk arises
from fraud, processing errors, system disruptions, or other
unanticipated events resulting in the institutions inability to deliver
products or services. This risk exists in each product and service
offered. The level of transaction risk is affected by the structure of the
institutions processing environment, including the types of services
offered and the complexity of the processes and supporting
technology. In most instances, e-banking activities will increase the
complexity of the institutions activities and the quantity of its
transaction/operations risk, especially if the institution is offering
innovative services that have not been standardized. Since customers
expect e-banking services to be available 24 hours a day, 7 days a
week, financial institutions should ensure their e-banking
infrastructures contain sufficient capacity and redundancy to ensure
reliable service availability. Even institutions that do not consider e-
banking a critical financial service due to the availability of alternate
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which could lead either to rapid flows in or out of the bank) it could
be very difficult to manage liquidity.
3) Credit risk
4) Operations risk-
volume forecasts
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In brief, this is a new area, nobody knows all the answers, and
banks need to exercise particular caution.
5) Regulatory risk-
6) Legal risk-
7) Reputational risk-
internal guidance notes for examiners, and many have released risk-
management guidelines for banks.
Adaptation-
Legalization-
Harmonization-
Integration-
Many banks are finding that their systems are being probed for
weaknesses hundreds of times a day but damage/losses arising from
security breaches have so far tended to be minor. However some
banks could develop more sensitive "burglar alarms", so that they are
better aware of the nature and frequency of unsuccessful attempts to
break into their system. The most sensitive computer systems, such
as those used for high value payments or those storing highly
confidential information, tend to be the most comprehensively
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secured. One could therefore imply that the greater the potential loss
to a bank the less likely it is to occur, and in general this is the case.
However, while banks tend to have reasonable perimeter security,
there is sometimes insufficient segregation between internal systems
and poor internal security. It may be that someone could breach the
lighter security around a low value system. It is easy to overemphasize
the security risks in e-banking. It must be remembered that the
Internet could remove some errors introduced by manual processing
(by increasing the degree of straight through processing from the
customer through banks systems). This reduces risks to the integrity
of transaction data (although the risk of customers incorrectly
inputting data remains). As e-banking advances, focusing general
attention on security risks, there could be large security gains.
Financial institutions need as a minimum to have:
These are the issues line supervisors will be raising with their
banks as part of their on-going supervision. Security issues are a
major source of concern for everyone both inside and outside the
banking industry. E-banking increases security risks, potentially
exposing hitherto isolated systems to open and risky environments.
Both the FSA and banks need to be proactive in monitoring and
managing the security threat.
The most sensitive computer systems, such as those used for high
value payments or those storing highly confidential information, tend
to be the most comprehensively secured. One could therefore imply
that the greater the potential loss to a bank the less likely it is to
occur, and in general this is the case. However, while banks tend to
have reasonable perimeter security, there is sometimes insufficient
segregation between internal systems and poor internal security. It
may be that someone could breach the lighter security around a low
value system, e.g. a banks retail web site, and gain entry to a high
value system via the banks internal network. We are encouraging
banks to look at the firewalls between their different systems to
ensure adequate damage limitation should an external breach occur.
As ever though, the greatest threat so far has been from the enemy
within i.e. your own employees, contractors and so on.
So what should banks be doing? Our view is that to deal with these
emerging threats effectively, financial institutions need as a minimum
to have:
TYPES OF E-BANKING:
Following are the types of e-banking
Internet banking
Mobile banking
ATM
Telephone banking
Internet Banking:
Features:
Internet banking has following features
1) Time and Space-
By eliminating the limitations of time and distance, electronic
financial transactions can make cross-border transactions easier
and thus make it possible to provide services to customers on a
global scale. In effect, online finance may eventually lead to
complete globalization of financial services, making the national
borders irrelevant.
2) Electronic financial transactions-
Electronic financial transactions have helped create new
services such as the virtual financial site that includes services
crossing the traditional borders between financial services as
well as aggregation that allows consumers to obtain
consolidated information about their financial accounts in one
place.
Electronic bill presentment and payment - EBPP
Funds transfer between a customer's own checking and
savings accounts, or to another customer's account
Investment purchase or sale
Loan applications and transactions, such as repayments
3) Security-
Since electronic financial transactions, especially those in
online retail banking, are being conducted on open networks
centered on the Internet, many challenges arise in terms of
transaction security, consumer protection and privacy. The
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Transaction types
Online banking puts the power of banking into the hands of the
customer and allows the customers to self-service themselves
with all their banking needs, just as customers have become used
to getting money from an ATM instead of going to the cash desk
in the bank. With this online service, customers can view their
account details, review their account history, transfer funds, order
checks, pay bills, re-order checks and get in touch with the
customer care department of the bank. In most cases, there is no
special software to install other than a web browser and many
banks do not charge for this service
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Mobile Banking:
Mobile banking is a term used for performing balance
checks, account transactions, payments etc. via a mobile device such
as a mobile phone. Mobile banking today (2008) is most often
performed via SMS or the Mobile Internet but can also use special
programs downloaded to the mobile device.
Mobile Accounting
Mobile Brokerage
Mobile Financial Information Services
Features:
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Account Information
Investments
Support
Content Services
ATM:
The ATM got smaller, faster and easier over the years.
Thereafter, the history of ATMs paused for over 25 years, until De La
Rue developed the first electronic ATM, which was installed first in
Enfield Town in North London on 27 June 1967 by Barclays Bank..
This instance of the invention is credited to John Shepherd-Barron,
although various other engineers were awarded patents for related
technologies at the time. Shepherd-Barron was awarded an OBE in
the 2005 New Year's Honors List. The first person to use the machine
was Rag Varney of "On the Buses" fame, a British Television
programmed from the 1960s. The first ATMs accepted only a single-
use token or voucher, which was retained by the machine. These
worked on various principles including radiation and low-coercively
magnetism that was wiped by the card reader to make fraud more
difficult. The idea of a PIN stored on the card was developed by the
British engineer John Rose in 1965.
ATMs first came into wide UK use in 1973; the IBM 2984
was designed at the request of Lloyds Bank. The 2984 CIT (Cash
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Issuing Terminal) was the first true Cash point, similar in function to
today's machines; Cash point is still a registered trademark of Lloyds
TSB in the U.K. All were online and issued a variable amount which
was immediately deducted from the account. A small number of
2984s were supplied to a USA bank.
Telephone banking:
going down to your local branch office when you bank online you can
accomplish multiple tasks at once with the click of a button.
TRENDS IN E-BANKING
The advent of the Internet has revolutionized the way the
financial services industry conducts business, empowering
organizations with new business models and new ways to offer 24x7
accessibility to their customers.
Over the last few years, the e-banking and wireless market has
been one of the fastest growing markets in the world and it is still
growing at a rapid pace. According to the GSM Association and
Ovum, the number of e-banking subscribers exceeded 2 billion in
September 2005, and now exceeds 2.5 billion (of which more than 2
billion are GSM).
In the last 4 years, banks across the globe have invested billions
of dollars to build sophisticated internet banking capabilities. As the
trend is shifting to e-banking, there is a challenge for CIOs and CTOs
of these banks to decide on how to leverage their investment in
internet banking and offer e-banking, in the shortest possible time.
For instance, the AP government has tied up with banks like the
State Bank of [Get Quote] India [Get Quote], Union Bank of India
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[Get Quote], Axis Bank, Andhra Bank [Get Quote], State Bank of
Hyderabad, Andhra Pradesh Garmin Vikas Bank, and Punjab
National Bank [Get Quote].
Anurag Gupta, founder director & CEO of ALW, says: "We have
carried out pilot projects with SBI in villages located in some of the
most inaccessible and difficult terrains of the country such as
Pithoragarh in Uttarakhand, Mizoram, Meghalaya, and remote
villages in Andhra Pradesh."
Lokanath Panda, director, ALW, also pointed out that SBI had
tied up with the Indian Post to extend banking services especially in
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E-BANKING SUGGESTION
Micro payments
SMART Money
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G-Cash
E-banking Remittance
million debit card users and 25 million credit card users. Only
Indian rupee-based domestic services shall be provided on the
mobile- payment platform, and the use of mobile-banking for
cross-border transactions have been strictly prohibited. Banks
which are based, licensed and supervised in India will be allowed
to offer such services. Further, only banks which have
implemented the core banking platform will be allowed to offer e-
banking. At the same time, the RBI has recommended that all e-
banking transactions are validated through a two-factor
authentication system, thereby complying with the latest security
and encryption standards.
PROGRESS OF E-BANKING
First, the new credit policy of the RBI came along with
guidelines for facilitating e-banking payments. Second, Dr Raghu
Raghuraman's CSFR report states that ''E-banking is the most
promising front end technology'' for broadening the access of
finance in the country.
.
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CASE STUDIES
The big push came when LG Telecom Ltd., the smallest of Korea's
three e-banking service providers teamed up with the Kookmin bank
to launch the Bank on' service. Under this scheme e-banking users
were able to use smart chips embedded in cell phones for accessing all
of the transaction and enquiry based services. The chip-based service
automated the authentication of users when they accessed their
bank's financial services to make the whole process much faster and
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convenient. The icing on the cake came with the ability of these chip
enabled cell phones to be used simultaneously as cash cards. By
October 2004 there were already about 100,000 infrared readers
adapted to take payment directly from e-banking handsets in Korea.
Users can now use their cell phones to pay for everything, from
restaurant bills, travel tickets, merchandise and even haircuts.
CONCLUSION
BIBLIOGRAPHY
http:/www.bis.org/pub/bcbs76.htm
http:/www.allbusiness.com/technology/technology-
service/278931-1.html